Little offered cities, counties federal aid for tax relief. But some aren’t taking it
In August, Gov. Brad Little made local governments an offer most couldn’t refuse.
If cities and counties promised not to take any increase in property taxes, then the state would use some of the $1.25 billion it received in coronavirus relief from Congress in March to cover their public safety budgets. The result? Most property taxpayers wouldn’t see increases in their tax bills this year.
Officials in Boise, Meridian, Nampa and Caldwell all took up his offer — at first.
Now some local governments are opting out. The money, they say, carries too many risks that they fear could result in a bill down the road for taxpayers larger than what they would save today.
The governments include Nampa, Caldwell and Canyon County. For the fiscal year starting Oct. 1, all of them will still forego the annual increase in their property tax budget of up to 3% that the state allows, though they will take the allowable revenue that comes from new construction being added to tax rolls.
That means taxpayers could still expect to see a slight increase in their December tax bills compared with their neighbors in cities that are taking the governor’s money. Even with the decision not to take a property tax increase, residential property values have increased more rapidly than those of commercial properties, thus pushing up the average homeowners’ tax bill.
But residents of cities declining the governor’s money likely will see smaller fluctuations in their tax bills between this year and the next.
Take, for example, a homeowner in Nampa. This year, property values there rose 20%, according to city Finance Director Doug Racine. Had the city taken Little’s money to cover the public safety budget, the average homeowner would see a 20% reduction in city taxes. The decrease would cancel out the increase in property value, leaving the bill relatively unchanged from last year.
But the next year, Nampa would have to ask its residents to pay for its public safety budget again. And if home values rise more — as they are expected to — a homeowner could see taxes increase from this year to next by as much as 40%, Racine predicted.
“We could have a massive curve down and then a massive curve up,” Racine told the Nampa City Council during a special meeting Thursday.
Cities worry about liability, payback, audit
Mayor Debbie Kling said she worried that the one-time infusion of federal money would disguise the increase in taxpayers’ property values that was contributing to their higher tax bills.
“The increase would be hidden, but next year it would be a shocking whammy,” she told the council.
By not taking Gov. Little’s money, residents’ property taxes will likely increase, but more slowly.
Plus, Racine argued, the city would avoid possible liability issues stemming from Little’s program.
Nampa, as well as Caldwell and Canyon County, worried that Little’s program did not meet the requirements of the $2.2 trillion coronavirus relief law Congress passed.
Guidance released from the U.S. Treasury Department on Aug. 10 indicated that states can use the coronavirus relief funds to cover payroll expenses for public safety employees. But according to Treasury’s own Office of the Inspector General, the states and local governments receiving the relief funds must demonstrate that the money was spent to mitigate the COVID-19 emergency.
That left cities worrying: In the case of an audit, would they be able to prove that the funds had been used for purposes related to COVID-19?
Maybe not, given that the funds would pay for police officers and administrators they would have needed anyway.
The governor stands by his offer.
“Little has worked closely with the U.S. Department of Treasury and followed the CARES Act and Treasury guidance carefully,” wrote his spokeswoman, Marissa Morrison, in an email to the Statesman. “His team has had multiple conversations with Treasury staff, including this week, and he remains confident in the program’s structure.”
Other local governments, like Ada County and Meridian, are still planning to take the governor’s funds.
“Meridian has been informed that Governor Little has found that covering public safety positions will assist with the mitigation of and response to COVID-19,” wrote city spokeswoman Shandy Lam in an email to the Statesman. “With that, Meridian believes that this program is legal.”
Ada County likewise found the program was “an appropriate use of CARES Act funding and provided for much-needed tax relief to the residents of Ada County,” wrote Elizabeth Duncan, spokeswoman for the Ada County commissioners, in an email to the Statesman.
Yet, officials in cities like Caldwell and Nampa remain skeptical. If audited and found to have violated the terms of the funding, those local governments would have to pay back that money to the federal government, Racine told the Nampa City Council.
Nampa anticipated that it would receive $9.2 million in through the governor’s program. If it had to pay that back, the city would nearly wipe out its reserves, Racine said.
Plus, a negative audit could put the city in a poor position to receive more federal funds in the future. The federal government gave the city $6.3 million in fiscal year 2019 in grants from the Housing and Urban Development, Justice, and Transportation departments.
“You try to limit liability as much as you can,” City Councilman Randy Haverfield said. “I have concern about accepting a bitter pill that potentially is going to hurt us long-term.”
Nampa City Councilman Darl Bruner was the lone vote in favor of taking Little’s money. He felt that the benefits of tax relief outweighed the risks.
“Property taxes need to be our top priority,” he said.
As of Friday, Sept. 18, these Treasure Valley local governments had pulled out of the governor’s public safety initiative:
- Nampa
- Caldwell
- Canyon County
These Treasure Valley cities and counties had said they would participate:
- Ada County
- Boise
- Meridian
- Eagle
- Star
- Garden City
